THE HONGKONG AND SHANGHAI BANKING CORPORATION LTD v. TAI YUE FOR AND ANOTHER

HCMP 6983/1999

[2019] HKCFI 2888

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 6983 OF 1999

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J U D G M E N T

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Background

1.  This is an appeal against a master’s decision. The ultimate question is whether the charging order obtained by the plaintiff (“Bank”) on the property in question, namely, a flat in Sincere House, 83 Argyle Street, Kowloon (“Sincere House Property”), of which the 2^nd defendant (“Mdm Kok”) is the sole registered owner, should be discharged.  The two principal issues raised are, first, what is the correct procedure for Mdm Kok to challenge the charging order, and, secondly, whether a letter written by her solicitors contained an acknowledgment of the Bank’s claim within the meaning of the Limitation Ordinance (Cap 347).

2.  These proceedings date back a very long time.  The main primary facts are not in dispute.  The 1^st defendant (“Mr Tai”) and Mdm Kok were married in 1986.  Together they brought up a daughter Mdm Kok had from a previous marriage (to whom I shall refer simply as the “daughter”). In 1997, they sold their previous flat and purchased a flat in Three Island Place in North Point (“Island Place Property”) with the help of a mortgage loan in the amount of $4.71m and a bridging loan in the sum of $1.2m from the Bank (“the Loans”).  After the financial crisis in 1997, their trading business collapsed and they became unable to service the Loans.  In November 1999, the Bank commenced the underlying proceedings herein, namely, HCMP 6983/1999, against the couple, and on 17 February 2000, Master Jones gave judgment ordering Mr Tai and Mdm Kok to repay the outstanding balance of the Loans and deliver vacant possession of the Island Place Property to the Bank (“Judgment”).

3.  Mdm Kok said that they were evicted from the Island Place Property in March 2000 and were living on comprehensive social security payments and that there was a real prospect the family would be rendered homeless or forced to live in a “cage home”.  This is disputed by the Bank, but nothing turns on this.

4.  In any event, the Bank managed to procure the sale of the Island Place Property in September 2000 for $3.25m, which left an outstanding balance of the Loans in the sum of approximately $1.3m at the time.

5.  The family then moved to different successive addresses and, according to Mdm Kok, as a result they did not receive the various letters sent by the Bank to them at other addresses between 2001 and 2008 seeking repayment of the balance of the Loans.  She said that none of the Bank’s staff they had dealt with had ever suggested that they would still owe money to the Bank after surrendering the Island Place Property, and that there was no reason for Mr Tai and herself to believe that the proceeds of sale of that property would be insufficient to cover the outstanding balance.

6.  This is disputed by the Bank, who said that one of the addresses to which a letter was sent by the Bank was provided by Mr Tai when he agreed to surrender possession of the Island Place Property.  The Bank also stated that one of the letters was sent to the Bank’s banking centre after telephone conversations between an employee of the Bank and Mr Tai in February 2001, in which Mr Tai was informed that he was still indebted to the Bank and confirmed that he would collect the demand letter at the banking centre.  I need not resolve this factual dispute for the purpose of this application.

7.  Meanwhile, the daughter began to have mental problems and was diagnosed with schizophrenia in around 2003, as evidenced by various medical documents.  Mdm Kok said that the daughter often had to be placed in the care of psychiatric ward in hospitals.

8.  In January 2006, the Sincere House Property — the property directly affected by this appeal — was purchased for $1.76m in the name of the daughter. According to Mdm Kok, this was financed by (i) money lent by their relatives and acquaintances, including Mdm Kok’s ex‑husband who is the natural father of the daughter, who agreed to help so that the family would be able to provide a more stable home for the daughter, and (ii) money that Mr Tai and Mdm Kok had saved up by then.  Mdm Kok said that the property was initially purchased in the daughter’s name at the insistence of her ex‑husband.

9.  In August 2008, however, the Sincere House Property was assigned by the daughter to Mdm Kok.  Although the Assignment was stated to be for the consideration of $2m, on Mdm Kok’s case the price was not actually paid, since (she said) the Assignment was made because the daughter’s mental condition caused her to engage in compulsive attempts to sell her possessions from time to time, and that it was considered safer for the family for the property to be kept in Mdm Kok’s name.

10.  To her surprise, Mdm Kok and Mr Tai received a letter from the Bank in January 2013 asking for repayment of about $2.2m, failing which legal proceedings would be commenced.

11.  On 7 February 2013, almost 13 years after the Judgment, the Bank submitted an application ex parte by way of an affirmation made by an assistant manager, seeking a charging order nisi on Mdm Kok’s interest in the Sincere House Property on the strength of the Judgment.  On the question of limitation, the affirmation specifically stated:

“ I was advised by Mayer Brown JSM, the Plaintiff’s solicitors herein, and verily believe that S.4(4) of the Limitation Ordinance, Cap. 347 applies only to the enforcement of judgments by suing on them and does not apply to the execution of judgments including execution by way of charging orders. In this regard, I was being referred to the case Lowsley v. Forbes [1998] 3 WLR 501.”

As explained below, this was not an entirely accurate statement of the legal position on the state of the authorities at that time, and was indeed shown to be incorrect by a later Court of Appeal authority.  It is right to point out at once, however, that the Bank’s evidence was that the misstatement was not intentional and there is no suggestion from Mdm Kok to the contrary.

12.  On 20 February 2013, Master Levy granted the charging order nisi sought by the Bank upon consideration of the papers alone (“Charging Order”).

13.  On 15 March 2013, at the hearing to show cause, attended by the Bank by solicitors and by Mdm Kok in person, Master de Souza made absolute the Charging Order.  It is common ground that, at that hearing, Mdm Kok did not make any submission that the application was time‑barred.

14.  In June 2013, Mr Tai and Mdm Kok applied for legal aid for the purpose of contesting the Charging Order but were refused.  In January 2015, when the Bank threatened to apply for an order for sale, Mdm Kok wrote to the Legal Aid Department again asking them to reconsider their decision, but apparently did not receive a reply.  In March 2016, Mr Tai was referred to the Free Legal Advice Scheme organised by the Department of Law of the University of Hong Kong (“Scheme”), which made representations on the couple’s behalf to the Legal Aid Department which eventually decided to grant legal aid to them on 20 July 2017. Mr Tai died from illness on 27 July 2017.

15.  In October 2017, Messrs Y K Lau & Chu was appointed as her legal representatives.  On 4 December 2017, the solicitors wrote a letter to the Bank (“Letter”), drawing attention to the arguments based on limitation, and invited the Bank to make a “constructive reply” for the purpose of resolving the matter by negotiations.  As there is a dispute whether there was an acknowledgement of liability by this letter, I set out the relevant passages:

“ We are instructed by our Client that the circumstances of the Incident are, inter alia, as follows:-

1. In or about June 1997, our Client and her late husband Mr. Tai Yue For (“Mr. Tai”) jointly purchased a property at Flat E, 27/F, Three Island Place, Island Place, No. 61 Tanner Road, Hong Kong (“the Island Place Property”). To finance the purchase, Mr. Tai and our Client borrowed from HSBC: (a) a Home Mortgage Loan of $4,710,000 and (b) a Bridging Loan of $1,200,000 on or about 15^th May 1997 (“the Mortgage”), with legal charge over the Island Place Property as security for the above loans.

…

3. HSBC then commenced mortgagee proceedings HCMP 6983 of 1999 under Order 88 of the Rules of the High Court to recover possession of the Island Place Property and obtained an Order on 17^th February 2000 against Mr. Tai and our Client for (a) payment of the outstanding sum under the Mortgage and (b) possession of the Island Place Property …

4. HSBC then exercised its power of sale under the Mortgage and sold the Island Place Property on 28^th September 2000 for $3,250,000. The net proceeds were not sufficient to fully repay the outstanding indebtedness. As at 22^nd February 2001, Mr. Tai and our Client were still indebted to HSBC in a sum of $1,688,687.71.

…

6. In the period after the sale of the Island Place Property, HSBC issued two further demand letters to Mr. Tai and our Client …

7. None of these letters were received by Mr. Tai and our Client because the letters were not addressed to their residence.

8. As a result, the outstanding indebtedness remained unpaid and interest continued to accrue thereon. HSBC took no further steps to enforce the Mortgage until 2013 and it issued a demand letter dated 29^th January 2013 to the Sincere House Property. By this time, the arrears amounted to $2,259,994.66.

9. On 20^th February 2013, upon the ex parte application of HSBC, Master Levy granted a charging order nisi over the Sincere House Property.

10. At the hearing to show cause on 15^th March 2013, Mr. Tai and our Client appeared in person. Upon hearing the parties, Master de Souza granted a charging order absolute over the Sincere House Property (“the Charging Order”).

In light of the circumstances, our Client is prepared to make an application to set aside the Charging Order on the ground that the application should be statute barred while HSBC had failed to discharge its duty of full and frank disclosure at the ex parte hearing by not drawing the Court’s attention to Re Man Po International Holdings Limited (HCCW 14 of 2012).

Mr. Tai and our Client originally had a defence to the application for the Charging Order under s. 4(4) of the Limitation Ordinance (Cap. 347) …

It follows that in Hong Kong, s. 4(4) of the Limitation Ordinance (Cap. 347) covers applications for charging orders to enforce a judgment debt which are made 12 years later after the date of the relevant judgment. Accordingly, HSBC’s application for the Charging Order was actually time‑barred.

…

The fact that the Defence was not brought to the Judge’s attention was not due to the fault of Mr. Tai and our Client, but the fault of the Plaintiff in not giving full and frank disclosure in its ex parte application. HSBC had failed to discharge its duty of full and frank disclosure at the ex parte hearing by not drawing the Court’s attention to Re Man Po International Holdings Limited, which was decided in August 2012 before the second affirmation of [the Bank’s manager] affirmed on 7^th February 2013.

At this stage, we would advise our Client to enter into negotiations for settlement by all suitable means including without prejudice negotiations.  We expect a constructive reply to this letter within the next 21 days, after which we will commence legal proceedings without further notice.”

16.  The parties being unable to resolve the matter by agreement, on 9 October 2018, Mdm Kok issued a summons to apply for an order pursuant to RHC Order 50 rule 7 that the Charging Order be “set aside” (which should more accurately be framed as an order for discharge).

17.  On 4 February 2019, Master Lui dismissed Mdm Kok’s application.  Mdm Kok now appeals from this decision.

The Issues

18.  Section 4(4) of the Limitation Ordinance (Cap 347) provides:

“ An action shall not be brought upon any judgment after the expiration of 12 years from the date on which the judgment became enforceable, and no arrears of interest in respect of any judgment debt shall be recovered after the expiration of 6 years from the date on which the interest became due.”

19.  The Bank’s application for the Charging Order was made after the expiration of 12 years from the date of the Judgment. At the time in February and March 2013, there were two conflicting first instance authorities in Hong Kong as to whether s 4(4) applied not only to an action brought on a judgment, but also to other legal proceedings to enforce it such as a winding up or bankruptcy petition.  In Re Li Man Hoo [2012] 2 HKLRD 743, Deputy Judge L Chan (as he then was) held that it did not, but in Re Man Po International Holdings Ltd [2012] 4 HKLRD 911, Harris J decided that it did.  The question has since been authoritatively determined by the Court of Appeal in Re Li Man Hoo (a debtor) [2013] 4 HKLRD 247 (judgment dated 30 August 2013), which held that the word “action” in s 4(4) has the very wide meaning attributed to it by s 2 which defines “action” as including “any proceeding in a court of law” and is apt to include legal proceedings by way of bankruptcy or winding‑up petitions.

20.  On this basis it is now common ground that the statement in the Bank’s affirmation set out in §11 above was an incorrect and (unintentionally) misleading statement of the law.  It also appears to be uncontroversial that, on the basis of the law as determined by the Court of Appeal in Re Li Man Hoo (a debtor), the court should not have granted the Charging Order nisi or made it absolute.

21.  Against this background, two main points have arisen: (1) Is Mdm Kok’s application for discharge impermissible because the only proper procedure was an appeal against Master de Souza’s decision to make the Charging Order absolute?  (2) Did the Letter contain an acknowledgment for the purpose of s 23 of the Limitation Ordinance?

Whether application for discharge the proper procedure

22.  Section 20B(4) of the High Court Ordinance (Cap 4) provides:

“ The Court of First Instance may at any time, on the application of the debtor or of any person interested in any property to which the order relates, make an order discharging or varying the charging order.”

23.  This is substantially repeated in RHC Order 50 rule 7(1) which provides:

“ … on the application of the judgment debtor or any other person interested in the subject‑matter of the charge, the Court may, at any time, whether before or after the order is made absolute, discharge or vary the order on such terms (if any) as to costs or otherwise as it thinks just.”

24.  On behalf of the Bank, Mr Man submitted that special circumstances must be shown before the court would discharge a charging order absolute.  He accepted that special circumstances may be established, for example, where a third party with an interest in the property had had no opportunity to address the court when the order was made, where there is supervening bankruptcy of the judgment debtor, where there has been a material change of circumstances, where the judgment debtor has become aware of facts which he could not reasonably have known, and where the court was misled or there was fraud.  He submitted, however, that none of these applied in the present case. 

25.  In particular, he submitted that limitation is a defence which needs to be specifically pleaded and will not be raised by the court of its own motion.  Therefore, on this argument, the Masters were not misled.  I am unable to accept this submission.  Having specifically included the misleading statement in its affirmation, it lies ill in the Bank’s mouth to say it was in fact unnecessary and immaterial.  The duty of full and frank disclosure on an ex parte application extends to matters of law: East Asia Satellite Television (Holdings) Ltd v New Cotai LLC [2011] 3 HKLRD 734, at §82.  It seems to me it was within the Bank’s duty of full and frank disclosure, as an applicant in an ex parte application, to draw attention to potential defences in law available to the defendants.  Even if the Masters could not have taken any limitation point of their own motion (as to which I express no opinion), there would be nothing to prevent them from enquiring with the defendants, who were unrepresented, whether they wished to rely on the limitation defence.  If the defendants so wished, then applying the law as held by Harris J and subsequently confirmed by the Court of Appeal, the Masters would plainly not have made either the Charging Order nisi or absolute.

26.  Given that the Charging Order was obtained, as it was, on the basis of an affirmation containing a materially misleading statement of law, I consider that it is within the court’s power under Order 50 rule 7 to discharge it for that reason.  Mr Man relied on Tong Wai Tak & Another v Fok Sheung Ling (unrep, HCMP 2898/1999, 20 October 2011), §8(iii), to argue that an allegation of lack of disclosure cannot form the basis for an application for discharge if the point was not taken at the inter partes hearing for the Charging Order absolute.  I do not think one can elevate the particular holding on the facts of that case into an absolute rule of general application.  In any event, the present case is concerned with a positive materially misleading statement which was a continuing misrepresentation to the court at the inter partes hearing.

27.  For these reasons I am satisfied that it is open to Mdm Kok to apply to discharge the Charging Order, and not only to appeal it for which she would of course be long out of time.

28.  I should mention that Mr Man also submitted that it would be unjust to invoke Order 50 rule 7 in Mdm Kok’s favour because she had a clear intention to evade the judgment debt.  It seems to me, however, that all that Mr Man could point to as the basis for that submission was the non‑payment of the balance of the Judgment.  Mdm Kok has explained that she did not think that there was any outstanding balance she had to repay after surrendering the Island Place Property.  It would indeed be surprising that Mdm Kok should have caused the Sincere House Property to be transferred into her own name in 2008 if she was intent upon evading the Judgment.  I am not prepared to find an intent on her part to evade the judgment debt based on the written materials alone without hearing oral evidence.

Whether there was acknowledgment in the letter of 4 December 2017

29.  Section 23(3) of the Limitation Ordinance provides:

“ Where any right of action has accrued to recover any debt or other liquidated pecuniary claim, or any claim to the personal estate of a deceased person or to any share or interest therein, and the person liable or accountable therefor acknowledges the claim or makes any payment in respect thereof, the right shall be deemed to have accrued on and not before the date of the acknowledgment or the last payment …”

30.  Section 24 provides:

“ (1) Every such acknowledgment as aforesaid shall be in writing and signed by the person making the acknowledgment.

(2)   Any such acknowledgment or payment as aforesaid may be made by the agent of the person by whom it is required to be made under section 23, and shall be made to the person, or to an agent of the person, whose title or claim is being acknowledged or, as the case may be, in respect of whose claim the payment is being made.”

31.  Section 25(5) provides:

“ An acknowledgment of any debt or other liquidated pecuniary claim shall bind the acknowledgor and his successors but not any other person:

Provided that an acknowledgment made after the expiration of the period of limitation prescribed for the bringing of an action to recover the debt or other claim shall not bind any successor on whom the liability devolves on the determination of a preceding estate or interest in property under a settlement taking effect before the date of the acknowledgment.”

32.  Mr Man submitted for the Bank that the Letter acknowledged Mdm Kok’s state of indebtedness as at 22 February 2001 and 29 January 2013, focusing on numbered paragraphs 4 and 8 of the Letter.  Relying on In re Gee & Co (Woolwich) Ltd [1975] Ch 52, he submitted that by virtue of s 23(3), the Bank’s right of action is deemed to have accrued again on 29 January 2013 and that, on that basis, it would be pointless to discharge the Charging Order since the Bank would be entitled to re‑apply for a Charging Order at any time prior to 29 January 2025.

33.  On behalf of Mdm Kok, Mr Chan submitted that the Letter did not constitute an acknowledgement as it did not acknowledge that the Bank’s claim for a charging order existed on the date of the acknowledgment or on a day which falls within the limitation period next before the application for charging order. 

34.  On the proper approach to the question of acknowledgment, the principles that can be derived from the authorities (including the Court of Final Appeal’s decision in New World Development Co Ltd v Sun Hung Kai Securities Ltd (2006) 9 HKCFAR 403) have been conveniently set out in a passage in Hong Kong Civil Procedure quoted by Fung J in Shenzhen Tian He Jian Sang Electronic Holdings Co Ltd v Hong Kong Jian Sang Electronics (Group) Ltd [2008] 4 HKLRD 314 at §24.  The following points are the relevant ones for present purposes:

“ (3) The question is one of construction (as Lord Goddard CJ put it in Jones v. Bellgrove Properties Ltd [1949] 2 KB 700 at 704).

…

(6) The object of the construction exercise is to decide whether, fairly read, the document relied on constitutes an acknowledgment by the debtor of a liability to pay outstanding amounts to the creditor. There is no need for the document to specify the amount of the debt so long as it can be ascertained by other means, including resort to extrinsic evidence, without requiring the parties’ further agreement (see Good v Parry [1963] 2 QB 418 at 423‑424, Lord Denning MR, Dungate v Dungate [1965] 1 WLR 1477 at 1487, Diplock LJ and Jones v Bellgrove Properties Ltd [1949] 2 KB 700).

   (7)   See Ross v McGrath (unrep., 14 July 2004, English Court of Appeal) citing Good v Parry (above) and Dungate v Dungate [1965] 1 WLR 1477.  The debtor must, however, acknowledge his indebtedness and legal liability to pay the claim in question.  If a debtor denies liability, whether on the ground of ‘avoidance’ or an alleged set‑off or cross‑claim, then his statement cannot amount to an acknowledgment of the creditors’ claim.  The contention that some existing set‑off or cross‑claim reduces the creditor’s claim in part, the statement will amount to an acknowledgment of indebtedness for the balance: Surrendra Overseas Ltd v Govt of Sri Lanka [1977] 1 WLR 565, Kerr J, followed in Heath Lambert Ltd v Sociedad de Corretjae de Seguros & Another [2003] EWHC 2269 …”

35.  Two English cases illustrate the application of the principles in a way that is relevant to the present case.  In In re Flynn, deceased (No 2) [1969] 2 Ch 403, an American company (Morgan) claimed that Mr Flynn had on 13 December 1957, for value received, made and delivered to Morgan his promissory note whereby he promised to pay to the order of Morgan 6 months later the sum of US$75,000 with interest. The sum was not paid and, in October 1958, Morgan commenced an action in New York against Mr Flynn to recover that sum and interest.  On 9 June 1959, a pleading was lodged on behalf of Mr Flynn, which expressly admitted that he made and delivered to Morgan the promissory note, but denied that there was then due and owing to Morgan the sum claimed, and went on to plead that he had been induced to enter into the transaction as a result of a fraudulent conspiracy and misrepresentations made to him.  After Mr Flynn died, an administration order was made in England on 3 December 1964 which included a direction for an account to be taken of what was due to his creditors.  Morgan’s claim in the administration proceedings was resisted on the ground that it was time‑barred.  In response, Morgan contended that Mr Flynn’s answer filed in the New York proceedings constituted an acknowledgment in writing for the purpose of s 23(4) of the Limitation Act 1939, which was in materially the same terms as s 23(3) of our Limitation Ordinance.  The judge, Buckley J, considered that the deceased’s pleading in New York did necessarily infer that the sum of US$75,000 had in fact been advanced by Morgan to him by way of loan (p 409E‑F), but rejected the argument that it amounted to an acknowledgment, stating (at p 412B‑E):

“ … in my judgment, the authorities do establish the principle that the acknowledgment properly interpreted must be an acknowledgment of liability on the part of the person making the acknowledgment, and not merely an acknowledgment of certain facts which, taken in isolation, would give rise to a liability but which are alleged by the person who is said to have given an acknowledgment not to give rise to a liability by reason of other surrounding circumstances. Mr. Slade has contended that where one has a pleading in the nature of confession and avoidance, the confession can be taken as being an acknowledgment for the purposes of the statute, the avoidance being disregarded; but in my judgment that cannot be right. The whole burden of the pleading relied upon in the present case is that the deceased was not liable to the claimant. It is true that one finds in the pleading an admission that the deceased gave the promissory note and that no part of the moneys referred to in it have been paid, and I am satisfied also that by implication one must find in the document an indication that Morgan’s advanced 75,000 dollars to the deceased by way of loan. Nevertheless, the whole purpose of the defence is to say that, notwithstanding those circumstances, liability is denied. Although the grounds relied upon for denying liability carried no weight with the New York court, it seems to me impossible in those circumstances to treat that document as being an acknowledgment of the debt. Accordingly, in my opinion, no reliance can be placed upon that answer or upon the confirmatory affidavit which verified it as amounting to an acknowledgment for the purposes of section 23 of the Limitation Act, 1939.”

36.  In Surrendra Overseas Ltd v Government of Sri Lanka [1977] 1 WLR 565, after a voyage that ended in June 1968, disputes arose between the owners and the charterers concerning freight, demurrage, cargo damage and other expenses.  On 20 March 1970, the charterers wrote to the owners’ agents setting out the owners’ claim (stated to be in the sum of £2,447) and putting against that their set‑off and cross claim, with a resulting balance in favour of the owners of £661.  On 26 August 1971, the charterers paid the owners the sum of £661.  The owners did not accept that payment to have discharged the charterers’ liability.  On 19 July 1974, an arbitrator was appointed and the owners claimed the total sum of £2,447 for freight and demurrage, contending that the charterers’ letter of 20 March 1970 was an acknowledgement of the owners’ claims.  Kerr J, rejecting the argument, stated (at p 575E‑576A):

“ What I draw from these authorities, and from the ordinary meaning of ‘acknowledges the claim’, is that the debtor must acknowledge his indebtedness and legal liability to pay the claim in question. There is now no need to go further to seek for any implied promise to pay it. That artificiality has been swept away. But, taking the debtor’s statement as a whole, as it must be, he can only be held to have acknowledged the claim if he has in effect admitted his legal liability to pay that which the plaintiff seeks to recover. If he has denied liability, whether on the ground of what in pleader’s language is called ‘avoidance’, or on the ground of an alleged set off or cross‑claim. then his statement does not amount to an acknowledgment of the creditor’s claim. Alternatively, if he contends that some existing set offs or cross‑claim reduces the creditor’s claim in part, then the statement, taken as a whole, can only amount to an acknowledgment of indebtedness for the balance. In effect, ‘acknowledges the claim’ means that the statement in question must be an admission of that indebtedness which the plaintiff seeks to recover notwithstanding the expiry of the period of limitation.

In my judgment this analysis is supported by three considerations.  First, I think that the statement relied upon as an acknowledgment must be taken as a whole; the creditor is not entitled to pick out parts and ignore others.  Secondly, I think that an acknowledgment of indebtedness is the ordinary meaning of ‘acknowledges a claim’ and that the pre‑1939 authorities do not preclude any other conclusion. Thirdly, I think that this construction of the statute is in accordance with good sense and justice.  Otherwise, as was said by Bayley J. in Swann v. Sowell (1819) 2 B. & Ald. 759, this statutory provision could lend itself to abuse and injustice.  Having received a statement of account like the present, the recipient could wait until the alleged set off or cross‑claim has become [1977] 1 WLR 565 at 576 barred by the effluxion of six years and then, as here, institute proceedings on that part of the statement of account which conceded his claim, disregarding the other side of the account in the knowledge that it had become time barred.  This would neither be sensible nor a just construction of the Act.”

37.  In my judgment, much the same considerations, applied to the Letter, lead to the conclusion that it is not an acknowledgment for the purpose of s 23(3).  The Letter has to be construed as a whole. The Bank is not entitled to “pick out parts and ignore others”.  Read as a whole, it was plain that the whole purpose of the Letter was to say why Mdm Kok was no longer liable or indebted to the Bank.  The defence was one of confession and avoidance, accepting that there was at one time an indebtedness but asserting that any such debt was now statute‑barred.  The Letter was not therefore an acknowledgment of the Bank’s “claim” or Mdm Kok’s liability; on the contrary it was a denial of the claim and liability. 

38.  To apply s 23(3) in the way contended for by the Bank would mean that a party pleading a limitation defence would have to either dishonestly deny that the debt had ever been incurred in the past or wastefully not admit it, putting the plaintiff to needless proof, before setting up the Limitation Ordinance in defence.  This ought not, in my opinion, to be the policy of the law.

39.  Mr Man relied on the case of In re Gee & Co (Woolwich) Ltd [1975] Ch 52 to contend that the Letter amounted to an acknowledgment of Mdm Kok’s past liability as at 2001 and 2013.  That was a case where, a company having gone into liquidation in 1971, the question arose as to the recoverability of certain loans due to a director credited to his account with the company in 1958 and 1964 respectively, ie more than 6 years before the liquidation.  Since the balance sheet of the company as at 31 December 1965 recorded as a liability of the company the credit in the loans account of the director, the question was whether the 1965 balance sheet, which was signed by the directors, operated as a written acknowledgment for the purpose of s 23(4) of the Limitation Act 1939.  In particular, the liquidator’s counsel submitted that an acknowledgment was not effective unless it purported to be an acknowledgment of a debt subsisting at the date when the acknowledgment was made (p 65E).  Brightman J rejected the argument, holding (at pp 70G‑71A) that the signature of the directors related back to the date of the balance sheet, that a balance sheet was capable of being an effective acknowledgment of the state of indebtedness as at the date of the balance sheet, and that, in an appropriate case, the cause of action would be deemed to have accrued at the date of the balance sheet.

40.  If Mdm Kok’s solicitors had written to the Bank simply stating her indebtedness to the Bank as at 22 February 2001 and 29 January 2013, I can see that the Bank might very well rely on In re Gee & Co (Woolwich) Ltd to contend that the letter was a sufficient acknowledgment of the Bank’s claim and that time began to run again.  But the Letter did not simply do that.  As explained above, the Letter denied liability.  It set out the past accounts for the purpose of asserting a limitation defence.  It was very different from a balance sheet simply recording a liability as at the date to which the accounts were made up.  In these circumstances, I do not think that In re Gee & Co (Woolwich) Ltd supports the Bank’s position in the present case.

Conclusion

41.  For the above reasons, Mdm Kok’s appeal is allowed.  There will be an order discharging the Charging Order, and an order nisi that the costs here and below be to Mdm Kok to be taxed if not agreed.  Mdm Kok’s own costs are to be taxed in accordance with the Legal Aid Regulations.

42.  I should mention that, at the hearing, I raised the questions, assuming the appeal was to be dismissed, whether there might nevertheless be room for argument that the daughter retained beneficial ownership of or certain interest in the Sincere House Property despite that the legal title was transferred from her to Mdm Kok in 2008, and that given the daughter may be suffering from a certain mental illness, whether some other person such as the Official Solicitor might need to be asked to be involved on her behalf.  In the light of my conclusion on the appeal, however, these questions need not be pursued in the context of these proceedings.